Recovering Legal Costs in UAE Arbitration: Rules, Case Law, and Clause Drafting

A tribunal seated onshore in the UAE has no statutory power to award the winning party its legal fees. This article explains where that power comes from instead, how the Dubai courts reversed themselves on the question in 2024, and what an arbitration clause needs to say.

Can an arbitral tribunal award legal costs in the UAE?

–Yes, but only where the arbitration rules or the clause expressly say so

The Federal Arbitration Law allows a tribunal to assess and apportion the costs of the arbitration, but defines those costs narrowly. They are the fees and expenses of the tribunal and the cost of appointing experts. The fees a party pays its own lawyers fall outside that definition. Where the parties have adopted institutional rules that cover legal costs, or have written the power into the clause, the tribunal can award them. Where they have not, a costs award is exposed to annulment.

• The statute is silent on party legal fees. Article 46 of Federal Law No. 6 of 2018 covers the tribunal's own fees and expert costs. It says nothing about counsel fees, which are the largest cost in most arbitrations.
• The institutional rules fill the gap. Article 36 of the DIAC Arbitration Rules 2022 and Article 38(1) of the ICC Rules both include the parties' legal representation costs within the costs of the arbitration.
• The Dubai Court of Cassation reversed itself within nine months. On 5 February 2024 it annulled the costs element of an ICC award. On 19 November 2024 it held the opposite on the same rule.
• Only the costs element is annulled. Where a costs award fails, the rest of the award survives. The successful party keeps its damages and loses its fees.
• The seat decides the supervising court. DIAC arbitrations default to a DIFC seat, which places annulment with the DIFC Courts and removes the onshore risk entirely.

Who this applies to

This article is for in-house counsel, CFOs and founders negotiating arbitration clauses, for parties already in arbitration seated in the UAE, and for award creditors facing an annulment application directed at the costs element of their award. It is relevant across sectors, with particular weight for construction, energy and maritime and logistics disputes, where counsel and quantum expert fees regularly exceed the tribunal's own fees several times over.

For the earlier decision on which institution and seat to choose, see our article on DIAC versus ArbitrateAD and the UAE arbitration clause checklist.

The legal framework

Costs recovery in a UAE-seated arbitration is governed by a combination of federal legislation, institutional rules and the parties' own agreement. The principal sources are:

• Federal Law No. 6 of 2018 on Arbitration, Article 46, which defines the costs of the arbitration as the tribunal's fees and expenses and the cost of appointing experts
• DIAC Arbitration Rules 2022, Article 36, which expressly includes the fees of legal representatives, their expenses, and any other party costs the tribunal assesses
• ICC Rules of Arbitration, Article 38(1), which describes the costs of the arbitration as including the reasonable legal and other costs incurred by the parties
• DIFC Law No. 1 of 2008, Article 38, which includes the successful party's legal representation costs where those costs were claimed during the arbitration and the tribunal finds them reasonable
• The arbitration agreement itself, which can confer the power directly and is the only source the Dubai courts have never questioned

The supervising courts:

• Dubai Court of Cassation: final appellate court for onshore-seated arbitrations, and the source of both 2024 decisions
• DIFC Courts: supervisory court for DIFC-seated arbitrations, including all DIAC arbitrations where the parties have not agreed a seat
• Abu Dhabi Court of Cassation: has upheld tribunal authority over legal costs in several decisions, taking a more consistent line than Dubai

What the Federal Arbitration Law allows

The definition is closed, not illustrative

Article 46(1) allows the tribunal to estimate the costs of the arbitration. Those costs comprise the fees and expenses incurred by any member of the tribunal in performing the arbitration, together with the costs of appointing experts. Article 46(2) allows the tribunal to order that all or part of those costs be borne by one party.

The list is exhaustive. That distinction became the centre of both 2024 judgments, because the equivalent provision in the ICC Rules is drafted as an open list.

The proportions explain why this matters

On a substantial commercial claim, the institution's administrative fee and the tribunal's fees are a fraction of what the parties spend. Counsel fees, quantum and delay experts, and document production account for most of the expenditure. A party that recovers only the first category has won the arbitration and lost money doing it.

Our article on contractor payment security in the UAE sets out indicative ranges for filing fees, counsel fees and expert fees on a construction claim, which illustrate the gap.

The onshore courts offer no alternative

There is no procedure for recovering legal fees in UAE onshore court litigation under Federal Decree-Law No. 42 of 2022. Court filing fees are recoverable, counsel fees are not. Arbitration therefore does not create this exposure. It creates the opportunity to remove it by agreement, which litigation does not.

How the Dubai courts changed position in 2024

February 2024: the costs award annulled

On 5 February 2024 the Dubai Court of Cassation decided Commercial Case No. 821 and 857 of 2023. It upheld the Court of Appeal's partial annulment of an ICC award and quashed the tribunal's award of legal costs.

The Court stated the applicable rule in two limbs. A party may be ordered to pay fees, expenses and legal costs where a provision derived from the law allows it. Alternatively, the arbitration agreement may provide for it by an explicit and clear provision.

It then found neither limb satisfied:

• Article 46 of the Federal Arbitration Law does not cover party legal fees
• The arbitration agreement contained no wording authorising the tribunal to determine them
• Article 38 of the ICC Rules did not, in the Court's reading, confer the power explicitly
• The power of attorney granted to the award debtor's representative did not empower that representative to confer the authority on the tribunal

The decision attracted immediate criticism, in part because the party seeking to quash the costs award had itself claimed costs from the tribunal during the arbitration.

November 2024: the position restored

On 19 November 2024 the same court decided Commercial Case No. 756 of 2024 and reached the opposite conclusion on the same provision.

The reasoning turned on consent. Parties who agree to resolve a dispute under a particular set of arbitral rules are bound by those rules, subject only to any rule that would conflict with public order. Agreeing to arbitrate under the ICC Rules is therefore an agreement to Article 38.

The Court then construed Article 38(1) directly. The word "include" indicates that the list of costs is illustrative rather than exhaustive, in contrast to the closed wording of Article 46. The phrase covering the reasonable legal and other costs incurred by the parties amounts to an express and clear stipulation. On that basis the tribunal was entitled to award counsel fees.

The Court of Appeal had already taken that view on DIAC

In Case No. 33 of 2023 the Dubai Court of Appeal upheld an award of counsel costs made under the DIAC Rules, reading Article 36 as conferring the power. The Abu Dhabi courts have reached similar conclusions in several decisions of their own.

The practical position after November 2024 is that a costs award made under either the ICC or the DIAC rules should survive an annulment challenge in Dubai. The residual risk is that UAE courts do not operate a doctrine of binding precedent, so a later panel is free to depart from the 2024 reasoning.

What the institutional rules say

DIAC Rules 2022

Article 36 includes within the costs of the arbitration the fees of the parties' legal representatives, the expenses those representatives incur, and any other party costs as assessed and determined by the tribunal.

The final category is wider than it appears. The rules do not define what other party costs means, so management time, in-house counsel time and internal investigation costs may be recoverable where a tribunal accepts them and finds the amounts reasonable.

The 2007 DIAC Rules made no provision at all, which is why awards issued under them were vulnerable. Every arbitration filed after 21 March 2022 is governed by the 2022 Rules, regardless of when the underlying clause was signed.

ICC Rules

Article 38(1) describes the costs of the arbitration as including four categories. These are the ICC administrative expenses, the fees and expenses of the arbitrators, the fees and expenses of any tribunal-appointed experts, and the reasonable legal and other costs incurred by the parties. Article 38(4) then requires the tribunal to decide which party bears those costs, or how they are apportioned.

This is the wording that both 2024 judgments construed, reaching opposite conclusions.

Other institutions

Most major institutional rules empower tribunals to award the parties' legal fees, including the LCIA Rules, the SIAC Rules and the UNCITRAL Arbitration Rules. A clause that adopts any of them should support a costs award on the November 2024 reasoning, although none of those rules has yet been tested in the Dubai courts on this point.

Why the seat decides the outcome

Article 20.1 of the DIAC Rules 2022 makes the DIFC the initial seat where the parties have not agreed one. This reversed the position under the 2007 Rules, which defaulted to onshore Dubai.

The consequence is jurisdictional rather than substantive. A DIFC seat places supervision, ratification and annulment with the DIFC Courts. Both 2024 decisions were onshore annulment proceedings before the Dubai Court of Cassation. An arbitration seated in the DIFC never reaches that court.

The applicable arbitration law changes as well. Article 38 of DIFC Law No. 1 of 2008 includes the costs of legal representation of the successful party within the costs the tribunal fixes, subject to two conditions. Those costs must have been claimed during the arbitration, and the tribunal must determine that the amount, or part of it, is reasonable.

Common reasons a costs award is challenged

Award debtors raise the same objections repeatedly. Each is worth anticipating before the award is issued rather than after.

No express power in the arbitration agreement. The clause adopts institutional rules but says nothing about legal costs. This was the primary ground in the February 2024 annulment, and it remains the strongest objection available.

The power of attorney did not authorise it. In the February 2024 case the Court examined whether the representative who participated in the arbitration had authority to confer costs jurisdiction on the tribunal. A power of attorney drafted for litigation may not cover it.

The costs were not claimed during the proceedings. Article 38 of the DIFC Arbitration Law makes the claim a condition of recovery. A party that raises costs only after the hearings have closed risks losing them.

The amount is unreasonable. Both the DIFC law and the ICC and DIAC rules qualify recovery by reference to reasonableness. A tribunal that awards costs without any assessment of proportionality invites a challenge.

Public order. The November 2024 judgment preserved public order as the limit on party autonomy over institutional rules. It is a narrow ground, but it remains available.

Where a costs award is annulled, the annulment is partial. The mechanics of a partial annulment and the wider grounds are covered in our article on enforcement of foreign judgments and awards in the UAE.

What parties should do next

Parties negotiating or reviewing arbitration clauses should work through the following:

• Write the power into the clause. State expressly that the tribunal may determine and apportion the parties' legal representation costs, including counsel fees and expert fees. This is the only basis the Dubai courts have never rejected.
• Name the seat. Leaving the seat to the default rule hands the decision to the tribunal and leaves the supervising court unknown at the time of drafting.
• Specify the rules by name and edition. The 2007 and 2022 DIAC Rules differ materially on this point, and a clause referring simply to the DIAC Rules invites argument.
• Check the power of attorney. Confirm that the authority granted to counsel extends to agreeing the tribunal's jurisdiction over costs, which was a live issue in the February 2024 annulment.
• Claim costs during the arbitration. Submit a costs schedule before the proceedings close rather than waiting for the award, and support the amounts claimed with evidence of reasonableness.
• Review legacy clauses. Contracts signed before March 2022 that refer to the DIAC Rules will now be administered under the 2022 Rules, but the seat and costs position should be checked rather than assumed.

Parties already in arbitration should raise the costs question with the tribunal early, so that the procedural order records the basis on which costs will be determined. That record is useful evidence if the award is later challenged.

Are legal costs recoverable in UAE arbitration in 2026?

Under the ICC Rules and the DIAC Rules 2022, yes. Under the Federal Arbitration Law standing alone, no. The gap between those two answers is filled entirely by what the parties agreed when they drafted the clause, which gives the drafting stage more weight here than in most jurisdictions.

The commercial consequence is easy to overlook until an award lands. A party that wins a substantial arbitration and cannot recover counsel and expert fees may have spent a material proportion of its damages on obtaining them. Parties that treat the costs provision as boilerplate discover this at the end of a process that has already taken two years.

Two protections remove most of the risk. An express costs provision in the arbitration agreement puts the power beyond argument. A DIFC seat puts supervision with a court whose own arbitration law provides for legal costs. Together they make the November 2024 position unnecessary to rely on.

For parties reviewing arbitration clauses or facing a challenge to a costs award, our arbitration team advises on clause drafting, costs submissions to tribunals, and annulment proceedings before the onshore and DIFC courts.

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